Millions will save with energy price cap

The energy price cap which came into force on New Year’s Day is expected to save millions of people across the UK £76 a year on their energy bills.

But consumer groups claim householders could save even more money by switching their supplier.


Regulator Ofgem says the new cap means that a dual fuel user with typical usage and paying by direct debit will have to pay no more than £1,137 a year.

Users in England, Scotland and Wales currently on default tariffs like the expensive standard variable tariff (SVT) will save money under the scheme.

But people in Northern Ireland and those on pre-payment meters already have their own price cap.


Individual savings will depend on how much energy the household uses and how it is paid for because the cap is on the unit of energy and the standing charge – not the total bill.

The cost of electricity per unit is capped at 17p per kilowatt hour and gas at 4p.

The standing charge for dual fuel users will be no more than £177 a year, electricity-only will be £83 and gas users £94.


The scheme is to be reviewed in February and then adjusted each April and October.

Experts are already predicting the cap is likely to rise in April to reflect the higher cost that suppliers are having to pay for wholesale energy.

Centrica – owner of the country’s biggest supplier British Gas – has announced it will seek a judicial review to challenge the way the cap has been calculated, claiming the threshold has been set too low.


A Centrica spokesman commented: “As we have previously said, we do not believe that a price cap will benefit customers but we want to ensure that there is a transparent and rigorous regulatory process to deliver a price cap that allows suppliers, as a minimum, to continue to operate to meet the requirements of all customers.”

Ofgem maintains it carried out an extensive consultation process when setting the price cap which offers customers on poor value tariffs a fairer deal.

A spokesman added: “In the event of a judicial review we would defend our proposals robustly.”

Save more

Consumer organisations claim households could save even more money by switching suppliers.

Alex Neill of Which? said she feared people would be lulled into a false sense of security by the cap and urged them to consider switching, saying: “Which? research has previously found that the cap won’t cut bills for customers on three in ten dual-fuel deals.”


Citizen’s Advice chief executive Gillian Guy said: “The introduction of this cap will put an end to suppliers exploiting loyal customers. However, while people on default tariffs should now be paying a fairer price for their energy, they will still be better off if they shop around.

“People can also make longer-term savings by improving the energy efficiency of their homes. Simple steps, such as better insulation or heating controls, are a good place to start.”

Further crackdowns

Prime Minister Theresa May has said the energy cap is just the start of things to come with the government prepared to take action in other markets to ensure consumers are not being overcharged.

She said: “Our energy price cap will cut bills for millions of families and people across the UK who have been ripped off by energy companies for far too long.

“From today, money will go straight back into the pockets of loyal consumers, including the elderly and those on lower incomes who feel the pinch more acutely.

Unfairly overcharged

“But work to tackle this issue doesn’t stop there. We’re working with regulators and industry to ensure that consumers are not unfairly overcharged in the future – whether on their phone bills or their insurance premiums.”

The Competition and Markets Authority (CMA) has already suggested there could be radical reforms to the way insurance, broadband, mortgage and mobile phone firms operate after finding loyal customers are being ripped off to the tune of £4 billion a year.